What is the alternative stock market?
The alternative stock market describes share trading that takes place outside the most established stock exchanges. Instead of orders always being matched automatically, trades can take place through intermediaries, directly between parties or on smaller trading venues. This affects how quickly you can complete a trade and how the price is formed.
The term is often used for companies that are not listed on a stock exchange or that are at an earlier stage. For investors, it can give access to other types of companies than those on the major exchanges, but also a different risk profile and more practical work around the trade.
Trading outside the major exchanges
On the alternative stock market, trading usually happens less often and in smaller volumes than on the major exchanges. Trades can take place through intermediaries, directly between parties or on smaller trading venues, which means that price and availability can vary more from trade to trade.
Common differences from exchange trading are:
- Trading outside the major exchanges
- Often lower liquidity
- More variable pricing
- Less standardised processes
This means you need to pay closer attention to your time horizon and to how the trade is actually carried out.
What to check before you complete a trade
Worth bearing in mind
The biggest practical difference is that you often need to plan more. If it is hard to find a counterparty, you may have to accept a longer wait or a different price level than you first had in mind.
Pay extra attention to terms and execution. Make sure you understand the costs, the timetable and how the change of ownership will take place. In unlisted companies, it is especially important that the documentation is correct and that the share register is updated so that the ownership is actually right.
Frequently asked questions
What does the alternative stock market include?
It can include trading on smaller trading venues and trades made outside the major exchanges, including trading in unlisted companies.
Is the alternative stock market the same as the unlisted market?
Not always. The unlisted market can be part of it, but the alternative stock market can also include other forms of trading outside the largest exchanges.
Why do people trade shares on alternative markets?
To gain access to companies at earlier stages, find opportunities outside the major exchanges and sometimes get a different kind of risk and potential.
What are the most common risks?
Lower liquidity, larger price differences between trades and more limited information can make it harder to value shares and sell quickly.
How can I reduce my risk as an investor?
Read up on the company, understand the process for changing ownership, spread your risk and invest with a time horizon that suits the market's liquidity.